Check Out Our Latest Rental Property – Another Buy, Fix, and Rent
Nothing Fancy – Just Another REO Purchase
This home was a standard REO home listed for $55,000. We originally offered $35K and came to a final compromise of $38K with the bank. Once again, our offer was accepted over other higher offers solely on the basis that ours was a non-contingent cash offer.
This is the 10th property added to our rental portfolio all of which are in the same neighborhood. This property was purchased with all cash in order to keep things simple and provide leverage for our offer. Based on the 50% LTV after repairs on this property and the large equity positions in our other properties, our commercial lender allowed us to cash-out 100% of the purchase price and and provided us 100% of the repair funds for our latest project. So at the end of the day, we have no cash invested in this deal.
Project Numbers
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Only 6.3 years to Payoff this Rental Property
The plan is always to use all the positive cashflow to help pay down the monthly mortgage in order to own these properties free and clear as soon as possible. In this case here, after a proper cash reserve is established, we will take the $379 monthly cash flow and apply it to paying off the mortgage which will happen in a short 6.3 years!
| Quick Cash Flow Calculator | ||
| FINANCING | ||
| Purchase Price (or End Loan Amount) | $ 52,000 | |
| Downpayment (or Cash Still In Deal) | ||
| Principle | $ 52,000 | |
| Interest Rate (%) | 9.8% | |
| Term (years) | 15 | |
| Monthly principal & interest payment (P&I) | $ 552 | |
| yearly principle & interest payment | $ 6,629 | |
| 1st year principle | $ 1,533 | |
| Monthly interest only payment | $ 425 | |
| Years to payoff if all income goes toward debt | 6.3 | |
| PROPERTY EXPENSES (annual) | ||
| Property management | $ - | |
| Maintenance | $ 720 | |
| Repairs | $ - | |
| Allowance for vacancy | $ - | |
| Insurance | $ 600 | |
| Property taxes | $ 1,900 | |
| Utilities (annual) | ||
| Water & sewer | $ - | |
| Electric | $ - | |
| Gas | $ - | |
| Scavenger (garbage) | $ - | |
| Total Annual Expenses | $ 3,220 | |
| INCOME (annual) | ||
| Total Gross Income | Monthly $ 1,200 | Yearly $14,400 |
| NET INCOME AND RETURNS | ||
| N.O.I. (annual) | $ 11,180 | |
| Monthly Cash Flow (after P&I payment) | $379 | |
| Monthly Cash Flow (if interest only loan) | $507 | |
| CASHFLOW (ANNUAL) AFTER P&I | $4,551 | |
| CASHFLOW (ANNUAL) AFTER INTEREST | $6,084 | |
| Cap Rate* | 21.5% | |
| GROSS RENT MULTIPLIER | 3.61 | |
| Cash On Cash Return | INFINITE | |
| Total Return | INFINITE | |
| DSCR | 1.69 | |
Rehab Analysis and Walkthrough, Pt 1
Our construction manager and partner performs a detailed walk through of the property the day after we get it under contract. We discuss numbers and first impressions since this is the first time some of us our seeing the inside of the property.
Rehab Analysis and Walkthrough, Continued…
Below our video continues with a look at the basement and the plan for its rehab.
LEAVE A COMMENT: 2 Comments
How are you able to finance 100% of the purchase and repairs? Are you using a private lender?
In this case, the property was purchased with our own cash and the rehab funds were provided by our commercial lender. Sometimes we just use our own funds to rehab the property if we know we will be able to cash out all our money after the rehab is complete. The rehabs happen fast, 20-30 days, so our money isn’t tied up long. Based on the 50% LTV after repairs on this property and the large equity positions in our other properties, our commercial lender allowed us to cash-out 100% of the funds we had tied up in this deal. So at the end of the day, we have no cash invested in this house.
Obtaining private money doesn’t have to be complicated especially if you have a good exit strategy. Initially our private money was obtained through friends and family because we were just starting out. There are a lot of private money programs for sale out there that provide you the actual slides, presentation and pitches they use to obtain private money. It may be hard to convince someone to lend you money if you have no experience under your belt though. I would recommend partnering with someone more experienced that already has means to obtain money for a couple deals first and then you can add that experience to your resume and then start asking people to invest their money with you. You should be able find people at your local REI clubs to partner with.
See the rest of our portfolio here: investment property